Navigating Uncertainty to create the Banking Model of The Future

During times of marked uncertainty, the responsibilities of the banking industry are twofold, they must help customers and protect their business.

Covid-19 has no doubt thrown business expectations for 2020 for a loop and this is just as true when it comes to banking. Economic uncertainty is prevailing, staff are leaving the industry at an unprecedented rate and all whilst the industry attempts to innovate and support their operations to help design the banking model of the future.

In any scenario, banking executives must be aware that the ‘next normal’ that we are due to enter into differs greatly from the climate of the last decade and the predictions that were in place for the next. To this end, business leaders around the world should now be looking at the processes and tools which might help them to navigate that uncertainty and prosper in a post-pandemic world.

Banking Model of The Future

During times of marked uncertainty, the responsibilities of the banking industry are twofold – they must help their customers (especially small to midsized businesses) to navigate the storm and stay afloat whilst they simultaneously work to scale capacity and protect their business from said uncertainty.

Historically, this battle has been fought and won before and whilst there is certainly precedent for the current crisis, what the industry can learn from 2020 is singular in example. Realistically, much has shifted socially, financially & technologically since the credit crunch, executives must consider this when moving forward and navigating towards the banking model of the future.

Road Map

Before any significant changes can occur, executives must envisage an effective but realistic roadmap for their organization which caters for the coming weeks, months, and years. It must be a versatile response to the pandemic which prepares the organization for the changes it wishes to institute. Only then can you start to look at what your competitors are offering and how you can then best them.

Banks will need to make tough choices and prioritize various strategic banking platform modernization & digitization programs to reach the operating flexibility necessary to operate effectively around Covid-19. Thankfully, the examples in the industry that leaders can draw from are numerous.

Challenger Banks

Since 2007, the reality of the Challenger Bank – or Neobank – has become harder and harder for established banks to ignore. As of February 2019, in the US, there were at least 40 digital-first challenger banks, and in the UK there were more than double that. These banks are well placed to disrupt

Neobanks are doing numbers outside of the US and have even begun to take business away from larger entities. As of February 2020 for example, the UK-based Monzo boasted 3.5 million customers and is forecast to reach 5.5 million by the end of the year. Based on performance like this, analysts see it as only a matter of time before the challenger banks see widespread consumer interest in the US.

The progress of the digital-first players has been downplayed by many historically, but the Neobank provides customers with a service that conventional banks are failing to. To compete, established banks should consider imitating the flexibility of these services, providing benefits like seamless in-app experiences, a peerless user-friendly interface, and increased ease when opening an account.

Open Banking

Neobank’s boast a flexibility that will be particularly useful during Covid-19, they have no physical branch costs to field and consequently their infrastructure is protected from the threats of the pandemic. Open banking should be considered by established banks as it could well help them to get to the same place.

Open Banking describes the banking practice that provides third-party financial service providers with open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions via application programming interfaces.

Though the stakes are high where the technology is concerned, shifting from a product mindset to serving customer needs will drive innovation and competitive advantage. If U.S. banks and leaders can stick the landing, they’ll reap significant benefits. Namely, consumer confidence, more sophisticated digital transformation, and more profitable business models besides.

To learn more, download the full report here or continue the debate at the Banking Innovation Summit NA, a GDS Summit, where we bring together senior Banking executives who are actively seeking to share, learn, engage, and find the best technology solutions.

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